DCIT, Ludhiana V. M/s Aqua Power (P) Ltd., Mohali

ITA 276/CHANDI/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95449 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 06-08-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 11-03-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: ANIL KALIA
• Keywords: Opportunity of being heard; Capital receipt

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R.SOOD, ACCOUNTANT MEMBER ITA NO. 276/CHD/2013 ASSESSMENT YEAR: 2006-07 THE DCIT, VS M/S AQUA POWER P. LTD., CENTRAL CIRCLE II, HOUSE NO. 2587, LUDHIANA. PHASE 9, MOHALI. PAN: AADC7773Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANJIT SINGH RESPONDENT BY : SHRI ANIL KALIA DATE OF HEARING : 06.08.2015 DATE OF PRONOUNCEMENT : 10.08.2015 O R D E R PER BHAVNESH SAINI,JM THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDE R OF LD. CIT(APPEALS) CHANDIGARH DATED 14.12.2012 FOR ASSESSMENT YEAR 2007-08. 2. IN ALL THE GROUNDS OF APPEAL, REVENUE CHALLENGED THE DELETION OF ADDITION OF RS.1,64,64,860/- UNDER SECT ION 80IA OF THE INCOME TAX ACT ON INCOME FROM SALE OF CERS. 3. THE BRIEF FACTS ARE THAT ASSESSEE HAD CLAIMED DE DUCTION UNDER SECTION 80IA OF THE ACT OF RS. 1,64,64,860/- ON THE SALE OF CERS. THE ASSESSING OFFICER HELD THAT INCO ME ON SALE OF CERS WAS NOT DERIVED FROM THE INDUSTRIAL 2 UNDERTAKING AND SO THE ASSESSEE WAS NOT ELIGIBLE FO R DEDUCTION UNDER SECTION 80IA OF THE ACT ON INCOME E ARNED FROM SALE OF CERS AND ACCORDINGLY, DENIED THE DEDUC TION. 4. DURING THE COURSE OF APPELLATE PROCEEDINGS ASSES SEE SUBMITTED THAT INCOME FROM SALE OF CERS IS CAPITAL RECEIPT IN VIEW OF THE DECISION OF THE ITAT, HYDERABAD BENC H IN THE CASE OF MY HOME POWER LTD. 27 TAXMAN.COM 27 AND SO WAS NOT LIABLE TO THE TAXED. IT HAS ALSO BEEN SUBMITTE D THAT THE DECISION OF ITAT AMRITSAR BENCH IN THE CASE OF M/S SHRI BALAJI ALLOYS RELIED UPON BY THE ASSESSING OFFICER HAS BEEN SET ASIDE BY THE HON'BLE J&K HIGH COURT BY HOLDING THAT THE INCENTIVES TO BE CAPITAL RECEIPT IN THE HANDS OF TH E ASSESSEE. 5. THE LD. CIT(APPEALS), CONSIDERING THE SUBMISSION OF THE ASSESSEE DELETED THE ADDITION. HIS FINDINGS IN PAR A 5 OF THE APPELLATE ORDER ARE REPRODUCED AS UNDER : 5. I HAVE CONSIDERED THE SUBMISSION OF THE LD. COU NSEL. THE CASE OF THE APPELLANT BEFORE THE ASSESSING OFFICER WA S THAT THE INCOME EARNED ON THE SALE OF CERS WAS DIRECTLY LINKED TO THE ACTIVITIES OF THE INDUSTRIAL UNDERTAKING AND SO THIS INC OME WAS ELIGIBLE FOR INCLUSION IN THE INCOME QUALIFIED FOR DEDUCT ION UNDER SECTION 80IA. NOW THE CONTENTION OF THE APPELLANT IS TH AT THE INCOME ON SALE OF CERS IS NOT RELATED TO THE BUSINESS ACTIVITIES OF THE APPELLANT AND CONSTITUTES A CAPITAL RECEIPT NOT INCLUDIBLE IN THE TAXABLE INCOME AT ALL. THOUGH THERE IS A CLE AR CONTRADICTION IN THE TWO STANDS, THE BASIC ISSUE AL L ALONG HAS BEEN WHETHER THE INCOME FROM SALE OF CERS IS TAXABLE IN THE HANDS OF THE APPELLANT OR NOT. IN SUPPORT OF THAT IS SUE THE APPELLANT IS ENTITLED TO RAISE A NEW ARGUMENT AT ANY STAGE OF THE PROCEEDINGS. WITH THIS OBSERVATION, I HOLD, FOLLOWING T HE DECISION OF HONTDLE ITAT, HYDERABAD (SUPRA), THAT THE PROFIT ON SALE OF CERS IS A CAPITAL RECEIPT, NOT INCLUDIBLE IN THE TA XABLE INCOME 3 OF THE APPELLANT. ASSESSING OFFICER IS ACCORDINGLY DIRECTLY TO TREAT FROM SALE OF CARBON CREDITS (CERS) AS CAPITAL RECEIPT. THUS, THE INCOME FROM SALE OF CARBON CREDITS WILL N OT FORM PART OF TOTAL INCOME. 6. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PA RTIES. THE LD. DR SUBMITTED THAT LD. CIT(APPEALS) HAS IGNO RED THE FINDINGS ARRIVED AT BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. THE LD. CIT(APPEALS) ACCEPTED TH E CONSTRUCTION OF THE ASSESSEE THAT INCOME ON SALE OF CERS WAS CAPITAL RECEIPT WITHOUT BRINGING ON RECORD ANY MATERIAL TO THAT EFFECT. THE LD. CIT(APPEALS) HAS ERRED IN ADMITTING AND CONSIDERING NEW AND TOTALLY DIFFERENT ARGUMENT WITHOUT CALLING FOR REMAND REPORT FROM THE ASSESSING OFFICE R AND WITHOUT GIVING ANY OPPORTUNITY OF BEING HEARD TO TH E ASSESSING OFFICER. THEREFORE, THE ORDER PASSED BY THE LD. CIT(APPEALS) WAS AGAINST THE PRINCIPLE OF NATURAL J USTICE. THE LD. DR FURTHER SUBMITTED THAT LD. CIT(APPEALS) SHOULD NOT ALLOW THE ASSESSEE TO CHANGE THE STAND BECAUSE THE FACTS WERE BASED ON AUDITED ACCOUNTS SUBMITTED BY THE ASS ESSEE COMPANY AND THAT ASSESSEE CLAIMED THE AMOUNT IN QUE STION TO BE REVENUE RECEIPT SO AS TO ENTITLE DEDUCTION UN DER SECTION 80IA. THEREFORE, ASSESSEE SHOULD NOT BE PE RMITTED TO CHANGE THE STAND BEFORE LD. CIT(APPEALS). THERE FORE, HOLDING THE RECEIPT IN QUESTION TO BE CAPITAL RECEI PT, THE ORDER OF LD. CIT(APPEALS) IS PERVERSE IN LAW. THE LD. DR SUBMITTED THAT ASSESSEE DID NOT FILE ANY APPLICATIO N FOR ADMISSION OF ADDITIONAL GROUND OF APPEAL BEFORE LD. CIT(APPEALS). 4 7. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE LD. CIT(APPE ALS) AND ADMITTED THAT ASSESSEE HAS NOT RAISED ANY GROUND OF APPEAL BEFORE LD. CIT(APPEALS) CLAIMING RECEIPT TO BE CAPI TAL RECEIPT AND NO SPECIFIC ADDITIONAL GROUND WAS RAISED BEFORE LD. CIT(APPEALS) IN THIS REGARD. 8. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE FINDINGS OF AUTHORITIES BELOW. IT IS NOT IN DISPUT E WHEN ASSESSING OFFICER RAISED THE ISSUE OF CLAIM OF DEDU CTION UNDER SECTION 80IA ON THE INCOME FROM SALE OF CERS, THE ASSESSEE FILED THE DETAILED REPLY BEFORE ASSESSING OFFICER CLAIMING THEREIN THAT DEDUCTION UNDER SECTION 80IA OF THE ACT IS ELIGIBLE ON THE INCOME ARISING FROM SALE OF CERS. THUS, THE ASSESSEE CLAIMED THE SAID INCOME TO BE DE RIVED FROM BUSINESS OF THE ASSESSEE COMPANY. THE ASSESSI NG OFFICER, HOWEVER, DENIED THE DEDUCTION UNDER SECTIO N 80IA OF THE ACT ON THE ABOVE AMOUNT BECAUSE THE RECEIPT ON ACCOUNT OF SALE OF CERS WAS NOT DIRECTLY RELATED TO THE ELI GIBLE BUSINESS OF THE ASSESSEE. THE ASSESSEE HAS TAKEN S EVERAL GROUNDS BEFORE LD. CIT(APPEALS) IN WHICH THE ASSESS EE SIMILARLY CLAIMED THAT SINCE IT WAS A BUSINESS INCO ME OF THE ASSESSEE ON SALE OF CERS, THEREFORE, IT WAS DIRECTL Y CONNECTED WITH THE BUSINESS OF THE ASSESSEE COMPANY . THUS, THE ASSESSEE WAS ENTITLED TO DEDUCTION UNDER SECTION 80IA OF THE ACT. THE ASSESSEE, HOWEVER, TAKEN A SUMMERSAULT BEFORE LD. CIT(APPEALS) TAKING THE SUBM ISSION THAT THE INCOME ON SALE OF CERS IS NOT RELATED TO T HE BUSINESS ACTIVITY OF THE ASSESSEE AND WOULD CONSTIT UTE A 5 CAPITAL RECEIPT NOT INCLUDIBLE IN THE TAXABLE INCOM E AT ALL. THE LD. CIT(APPEALS) NOTED IN HIS FINDINGS THAT THE RE IS A CLEAR CONTRADICTION IN THE STAND TAKEN BY ASSESSEE BEFORE ASSESSING OFFICER AND BEFORE HIM. DESPITE THIS OBS ERVATION, THE LD. CIT(APPEALS) FOLLOWING THE ORDER OF ITAT HY DERABAD BENCH DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE H OLDING THE SALE OF CERS ( CARBON CREDITS) CAPITAL RECEIPTS . THE LD. DR WAS, THEREFORE, JUSTIFIED IN CONTENDING THAT THE APPELLATE ORDER IS PASSED WITHOUT FOLLOWING THE DUE PROCEDURE OF LAW BECAUSE ASSESSEE DID NOT MAKE ANY REQUEST FOR ADMIS SION OF ANY ADDITIONAL GROUND OF APPEAL BEFORE LD. CIT(APPE ALS) AND THE LD. CIT(APPEALS) ALSO WITHOUT CALLING FOR THE R EMAND REPORT FROM THE ASSESSING OFFICER AND WITHOUT GIVIN G ANY OPPORTUNITY OF BEING HEARD TO THE A.O. HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 9. FROM THE ABOVE DISCUSSION, IT IS CLEAR THAT LD. CIT(APPEALS) HAS TAKEN THE ARGUMENTS OF THE ASSESSE E TO BE CORRECT WITHOUT RAISING ANY ADDITIONAL GROUND OF AP PEAL BEFORE HIM BY THE ASSESSEE. THE LD. CIT(APPEALS) S HOULD CONFINE HIMSELF TO THE GROUND OF APPEAL RAISED BEFO RE HIM WHILE DECIDING THE ISSUE BEFORE HIM AND IN CASE A N EW SUBMISSION IS RAISED, THE OPPORTUNITY OF BEING HEAR D SHOULD BE GIVEN TO THE ASSESSING OFFICER TO REBUT THE SUBM ISSION OF THE ASSESSEE. THUS, THE ORDER OF THE LD. CIT(APPEA LS) CANNOT BE SUSTAINED IN LAW AND IS LIABLE TO BE SET ASIDE. WE, ACCORDINGLY, SET ASIDE THE ORDER OF THE LD. CIT(APP EALS) AND RESTORE THE MATTER IN ISSUE TO HIS FILE WITH DIRECT ION TO RE- DECIDE THE APPEAL OF THE ASSESSEE AS PER THE GROUND S OF 6 APPEAL RAISED BEFORE HIM IN APPEAL. THE LIBERTY IS, HOWEVER, GIVEN TO THE ASSESSEE TO TAKE APPROPRIATE STEPS FOR ADMISSION OF ADDITIONAL GROUND OF APPEAL, IF SO ADV ISED IN ACCORDANCE WITH LAW AND THE LD. CIT(APPEALS) SHALL FOLLOW THE DUE PROCESS OF LAW IN ACCORDANCE WITH LAW IN SU CH EVENTUALITY. THE LD. CIT(APPEALS) SHALL DECIDE THE APPEAL OF THE ASSESSEE STRICTLY IN ACCORDANCE WITH LAW BY GIV ING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE AS WELL AS TO THE ASSESSING OFFICER. 10. IN THE RESULT, DEPARTMENTAL APPEAL IS ALLOWED F OR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH AUGUST,2015. SD/- SD/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 10 TH AUGUST,2015. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT CHANDIGARH